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CISG CASE PRESENTATION

China 31 January 2000 CIETAC Arbitration proceeding (Clothes case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000131c1.html]

Primary source(s) of information for case presentation: Case text

Case Table of Contents


Case identification

DATE OF DECISION: 20000131 (31 January 2000)

JURISDICTION: Arbitration ; China

TRIBUNAL: China International Economic & Trade Arbitration Commission [CIETAC] (PRC)

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/2000/09

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: People's Republic of China (claimant)

BUYER'S COUNTRY: Germany (respondent)

GOODS INVOLVED: Clothes


UNCITRAL case abstract

PEOPLE'S REPUBLIC OF CHINA: China International Economic & Trade
Arbitration Commission [CIETAC] 31 January 2000 (Clothes case)

Case law on UNCITRAL texts [A/CN.9/SER.C/ABSTRACTS/120]
CLOUT abstract no. 1168

Reproduced with permission of UNCITRAL

Abstract prepared by MAA-Meihua Xu

A Chinese seller entered into a contract with a German buyer for the purchase of clothes. Later, the buyer discovered defects on two deliveries of the goods and raised objections, yet disposed of the goods. Upon receipt of the third delivery, the buyer refused to accept the goods asserting quality problems. The seller had to take the goods back to China and initiated arbitration proceedings requesting the Tribunal that the buyer should pay the price for the three deliveries and relevant interest plus the storage charge and returning cost of the third delivery. The payment of the price difference between air shipment and sea shipment was also claimed.

The buyer counter argued that since the goods delivered had severe defects, its clients refused to take them. Therefore, the seller violated the obligation to deliver the goods as required in the contract. The buyer had sent seventeen pieces of clothes back to the seller for inspection and the seller had confirmed that “we have found the problems you mentioned”. Moreover, after being urged by the buyer, the seller had entrusted a specialized company to inspect the remainder of the goods in the buyer’s warehouse, and the inspection report indicated that there were serious defects in material, colour, and workmanship. The seller admitted these problems in a fax to the buyer. The buyer thus stated that its refusal to take the third delivery was lawful and did not result in a breach of contract, and that the seller should bear the cost for returning the remaining clothes stored in the buyer’s warehouse.

The seller objected that although the buyer provided samples to show the defects of the goods, neither the source of the samples, nor the procedures followed in choosing them could prove the quality of the goods objectively, because the samples had been repaired by the buyer and they were chosen by the buyer without involvement of any independent inspection agency. As to the buyer’s refusal to take the third delivery, the seller argued that those goods were delivered after being inspected by the buyer. The buyer’s refusal two months later, when the goods were being shipped, was too late. Moreover, since the contract clearly stated that “the beneficiary is allowed to draw in the excess of letter of credit amount for the difference between air shipment and sea shipment”, the buyer’s refusal to pay the aforesaid amount raising quality problems was a breach of contract.

The seller finally stated that the buyer repaired the clothes in its factory. Pursuant to Article 46(3) CISG, the buyer may require the seller to remedy defects by repair, although this request must be made at the same time the buyer discovers the non-conformity of the goods, or within a reasonable period. Since the buyer had not given such a notice, it had lost its right to request repair.

The Arbitration Tribunal held that the CISG was the applicable law, as both China and Germany are Contracting States of the Convention.

Regarding the quality of the goods, although the parties did not stipulate an inspection clause, nor did they specify the inspection place or agency, the Arbitration Tribunal stated that the buyer has the right to inspect the goods after receiving them, pursuant to Article 38 CISG. Furthermore, the Tribunal noted that the seller, after receiving the seventeen defective clothes returned by the buyer, confirmed via fax that there were problems with the goods. The existence of defects was thus a fact confirmed by both parties.

The Arbitration Tribunal noted that although the buyer had given reason for refusing to take the third delivery, according to the CISG, its argument was unacceptable. The buyer should have raised the issue through legal procedure if it had objections to the quality of the goods, but could not refuse to take delivery. Therefore, the buyer’s refusal constituted a breach of contract. Considering that the seller had already taken back the goods, the Tribunal ruled that the buyer did not have to pay their price, but had to bear the cost of transportation and related interest. The Arbitration Tribunal upheld the seller’s claim for the difference between the air shipment and sea shipment since it was agreed by both parties before the delivery of the goods.

Regarding the buyer’s claim on the cost for remedying the defects of the goods, the Tribunal held that the buyer had repaired the goods at a reasonable cost and resold them at the same price as provided in the contract. However, it should have given notice to the seller especially about the cost which it was going to incur. Therefore, the buyer had not properly performed its obligation to mitigate the loss and it had to bear 30 per cent of the cost of repairing. As to the defective goods inspected and remained unsold, the Tribunal decided that the buyer did not have to pay their price and the seller should pay the cost incurred in Germany, including transportation, moving and warehouse fees, and 20 per cent of the contract price as the loss of profit resulting from the defective goods.

Finally, the buyer had to pay the price of the goods which had been sold. As to the buyer’s claims for customers’ loss, loss of discount fee, and loss of orders, the Arbitration Tribunal held that those losses were not foreseeable by the seller at the conclusion of the contract (Article 74 CISG), therefore, they should be dismissed.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 25 ; 38 ; 46(3) ; 73 ; 74 ; 77 ; 78

Classification of issues using UNCITRAL classification code numbers:

25B [Definition of fundamental breach: substantial deprivation of expectation];

38A [Buyer's obligation to examine goods: buyer's right to examine goods];

46C [Buyer's right to require repair of non-conforming goods]

73C [Defects in one delivery [does not] prevent use of other deliveries];

74A ; 74A1 ; 74B [General rules for measuring damages: loss suffered as consequence of breach; Includes loss of profit; Outer limits of damages: foreseeability of loss]

77A [Obligation to take reasonable measures to mitigate damages];

78B [Rate of interest]

Descriptors: Fundamental breach ; Examination of goods ; Repair ; Installment contracts ; Damages ; Profits, loss of ; Foreseeability of damages ; Interest

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Editorial remarks

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Zhong Guo Guo Ji Jing Mao Yi Zhong Cai Wei Yuan Hui Cai Jue Shu Hui Bian [Compilation of CIETAC Arbitration Awards] (May 2004) 2000 vol., pp. 1291-1296

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at nn.209, 220, Nordic Journal of Commercial Law (2/2005)

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Case text (English translation)

Queen Mary Case Translation Programme

China International Economic & Trade Arbitration Commission
CIETAC (PRC) Arbitration Award

Clothes case (31 January 2000)

Translation [*] by Meihua Xu [**]

Edited by JIANG Chi [***]

[Introduction]
I.     Facts of the Case
II.    Position of the Parties
III.   Opinion of the Arbitration Tribunal
IV.   Award

[INTRODUCTION]

The China's International Trade and Economic Arbitration Commission (hereafter, "the Arbitration Commission") accepted the case according to:

   -    The arbitration clause in Sales Confirmation Nos. xxx006, xxx007, xxx011, and xxx012 by and between Claimant [Seller], China Shijiazhuang xxx Clothing Factory, and Respondent [Buyer], Germany xxx Company, during the period from 5 February 1998 to 10 March 1998; and
   -    The written arbitration application submitted by [Seller] on 15 December 1998.

The Arbitration Rules of China's International Trade and Economic Arbitration Commission (hereafter, the "Arbitration Rules") are applicable to this case.

On 8 January 1999, the Secretary of the Arbitration Commission sent an Arbitration Notice and attached arbitration documents to the [Buyer] and the [Seller].

On 8 February 1999, Mr. A, the arbitrator appointed by the [Seller], Mr. D, the arbitrator appointed by the [Buyer], and Mr. P, the Presiding Arbitrator appointed by the Chairman of the Arbitration Commission, formed the Arbitration Tribunal to hear this case.

On 12 March 1999, the [Buyer] filed an arbitration counterclaim. The Arbitration Tribunal decided to review the [Seller]'s claim together with the [Buyer]'s counterclaim.

On 13 April 1999, the Arbitration Tribunal held a hearing session in Beijing. Both parties sent representatives to the hearing session. They made oral statements, answered the Arbitration Tribunal's questions, and presented arguments. After the hearing session, both parties submitted supplementary materials.

On 2 November 1999, after being requested by the Arbitration Tribunal, the Secretary of the Arbitration Commission postponed the deadline for filing the judgment in this case to 8 February 2000 based on Article 52 of the Arbitration Rules.

The Arbitral Tribunal has concluded the case and made its judgment based on the material submitted by both parties and the hearing session. The following are the facts, the Tribunal's opinion and award.

I. FACTS

From 5 February 1998 to 10 March 1998, the [Buyer] and the [Seller] concluded four contracts for the sale of clothes, Nos. xxx006, xxx007, xxx011, and xxx012 (collectively, the "Contracts").

II. POSITION OF THE PARTIES

A. [Seller]'s position

After concluding the contracts, on 6 March 1998, the [Seller] made delivery of the goods No. FL26 to W City by sea as set forth in the Contracts. Following the changes the [Buyer] made to the L/C, the [Seller] delivered goods identified as No. FL20, FL21, FL27, FL29/30/31/32, and FL38 on 8 March 1998, 13 March, and 20 March to Frankfurt by air.

After receiving the goods No. FL20, FL21, FL27, and FL28 on 2 April 1998, the [Buyer] raised objection to the quality of these goods, but accepted them.

After receiving the goods of deliveries No. FL29, FL30, FL31, and FL32, the [Buyer] raised objection to the quality of the goods on 8 May 1998, and again accepted them.

After receiving the Arrival Notice of the No. FL26 delivery of goods, the [Buyer] did not pay money to the L/C issuing bank in exchange for the Bill of Lading or to take the goods. [Buyer] refused to take these goods on the grounds that there was a quality problem. As a result, the [Seller] had to take goods back to China for resale.

In accordance with the arbitration clause in the Contracts, the [Seller] submitted an arbitration application on 15 December 1998 claiming that:

  1. [Buyer] should pay the price of US $8,778 for delivery of the No. FL26 goods under Contract No. xxx006 and should pay interest on this price in the amount of renminbi [RMB] 4,087.30. In addition, the [Buyer] should pay the transportation cost and warehouse fee for transporting the goods back to China, which amounts to Deutsche Mark [DM] 5,830.10 and related cost incurred in China, which is RMB 981.54

  2. [Buyer] should pay the purchase price of US $53,871.20 for the goods No. FL27, FL28, FL29, FL30, FL31 and FL32 and interest of RMB 25,084 on this amount.

  3. [Buyer] should pay the price difference between air shipment and sea shipment with respect to Contract Nos. xxx007, xxx006, xxx012, xxx011, which is US $11,422.72, together with interest of RMB 5,318.76 on this amount.

  4. [Buyer] should bear the [Seller]'s cost associated with filing the arbitration claim, including but not limited to the [Seller]'s attorneys' fee, which is RMB 30,000.

  5. [Buyer] should bear the entire arbitration fee.

B. [Buyer]'s position

The [Buyer] and the [Seller] signed Contracts No. xxx006, xxx007, xxx011, xxx012 whereby the [Seller] was to sell to the [Buyer] 4,360 pieces of clothes. The Contracts also provided that "the [Seller] should follow the [Buyer]'s purchase order of 4 February 1998, [Buyer]'s sample and sewing instructions."

The [Seller] and the [Buyer] also signed Purchase Confirmations on 18 February 1997 and 4 February 1998, and specified the requirement for material, cutting out, workmanship, quality, and size for goods covered by No. FL20, FL21, FL26, and FL27. However, the goods delivered by the [Seller] had serious defects in material, color, and size. The [Buyer] repeatedly notified the [Seller] of these quality problems and demanded improvement.

The defects include: material, color, bad stitching, and significant color difference at the sewing edge. Consequently, the [Buyer]'s customers refused to accept the goods. As such, the [Seller] breached its obligation under the Contracts.

The [Buyer] alleged that although it insisted that 50% of the goods identified as No. FL20, FL21, FL26, and FL27 should be inspected, the representative of the [Seller] only agreed to allow the [Buyer] to check 250 pieces of clothes, which had been selected in advance.

After inspection, the [Buyer] found certain quality problems and asked to open other boxes for further inspection. The [Seller] rejected this request. The [Seller] also rejected the [Buyer]'s request to inspect the goods of deliveries No. FL28, FL29, FL30, FL31, and FL32.

After receiving the goods, the [Buyer] immediately gave notice regarding the quality defects to the [Seller] according to Article 21 of the Contract.

Meanwhile, the [Buyer] also suggested that it would try to mitigate the damages by selling the clothes without considering the price, if the [Seller] so agreed. Although the [Seller] did not respond to this suggestion, the [Buyer] nevertheless implemented this proposal.

With respect to delivery of goods No. FL26, the [Buyer] notified the [Seller] that it would not pay the price unless the quality of goods was confirmed by a proper inspection.

As requested by the [Seller], on 20 May 1998, the [Buyer] sent back 17 pieces of clothes by express mail to let the [Seller] inspect them. After receiving the clothes, the [Seller] sent a fax to the [Buyer] on 29 May 1998, stating that "we have found the problems you claimed". Clearly, the [Seller] was admitting the quality problems identified by the [Buyer] in its fax.

After repeatedly being requested by the [Buyer], the [Seller] finally entrusted Ms. W of xxx Import & Export Company to inspect the goods remaining in the [Buyer]'s warehouse. Ms. W inspected 1,236 pieces of clothes and on 19 June 1998 submitted an inspection report stating that there were serious defects in material, color, and workmanship. The [Seller] admitted these problems in its fax sent to the [Buyer] on 23 June 1998.

Based on above facts, the [Buyer] claims the following damages:

1. US $2,842.41, custom fee paid for 1,236 pieces of clothes that the [Buyer] plans to send back to the [Seller].

2. US $657.45, transportation costs and associated labor costs incurred in Germany with respect to the aforesaid 1,236 pieces of clothes.

3. US $1,371.96, warehouse expenses with respect to the aforesaid clothes.

4. US $37,641.78, cost for repairing 3,760 pieces of clothes.

5. US $29,199.11, loss of profit as a result of the [Buyer]'s failure to deliver the clothes to its customer due to the quality problem of the 600 pieces in delivery No. FL26 and the 1,236 pieces of clothes, which the [Buyer] plans to send back to the [Seller].

6. US $6,222.09, which is equal to the 20% discount which the [Buyer] had to give to its customers because of the defects in the goods that [Buyer] received from the [Seller].

7. US $77,355.45, losses resulting from failure to deliver to the [Buyer]'s customers' the 600 pieces of clothes under delivery No. FL26 and the 1, 236 pieces of clothes that the [Buyer] is going to send back to the [Seller].

8. US $110,300.71, loss of order from Otto 35.6 [sic] regarding Spring/Summer 98 and Spring/Summer 99.

9. US $4,416.30, interest on the each of the amount identified in item 1 through 8 above, calculated at an annual interest rate of 8.5%.

10. US $5,000, the [Buyer]'s attorneys' fee for the arbitration.

The total amount of [Buyer]'s claim is US $275,007.26.

The [Buyer] asks the Tribunal to:

1. Dismiss the [Seller]'s claim in its "Arbitration Application" of 15 December 1998 in the total amount of US $11,422.72, covering the purchase price for delivery No. FL26 and the remaining 1,236 pieces of clothes, together with related loss of profit, loss of interest, and air transportation fee;

and further, to rule that:

2. [Buyer]'s rejection of delivery of goods No. FL26 is lawful, and does not breach the Contracts;

3. [Seller] shall bear the cost for returning the remaining 1,236 clothes temporarily stored in the [Buyer]'s warehouse. Therefore, the price the [Buyer] shall pay is US $53,871.20 - US $17,778.50 = US $36,092.70.

4. Accordingly, the [Seller] shall pay the [Buyer] US $233,914.56, which is the net of US $270,007.26, the total amount claimed by the [Buyer], minus US $36,092.70, the purchase price the [Buyer] owes to the [Seller].

5. [Seller] shall bear the entire arbitration fee.

6. [Seller] shall pay 8.5% annual interest on the aforesaid amount until the payment is made.

[Seller]'s response

The [Seller] argues that:

In the hearing session, the [Buyer] admitted that B Company, a Sino-foreign joint venture located in Guangdong province, was the material supplier, which was agreed by both parties. When manufacturing the goods for the first delivery, Mr. M, the representative of the [Buyer] in Nanjing, inspected the goods and also had sample goods inspected by a relevant agency in Hong Kong, and confirmed that the goods conformed to the specifications of the Contracts. According to the requirement for manufacturing tolerance in the contract, "reasonable tolerance for all clothes should be allowed."

The [Seller] emphasized that during the manufacturing process, the [Seller] made changes to cutting and sewing as requested by the [Buyer]. The [Buyer]'s claim of defects in sewing lacks legal basis.

It is true that the [Buyer] presented sample clothes to show the defects of the goods under the Contracts. However, neither the resource of the samples, nor the procedures followed in choosing the sample can objectively prove the quality of the goods in the instant case.

First, the sample goods presented by the [Buyer] have been repaired by the [Buyer]. Second, the samples were chosen by the [Buyer] itself alone without involvement of any independent inspection agency in Germany. As such, the process of choosing the sample is questionable.

Regarding the [Buyer]'s refusal to take delivery of the No. FL26 shipment of goods under Contract __006, the [Seller] asserts that these goods were delivered on 6 March 1998 after being inspected by the [Buyer]. However, it was not until 8 May 1998 that the [Buyer] refused to take delivery of the goods which were being shipped to Germany, claiming anticipatory repudiation on the [Seller]'s part. The [Buyer]'s time for complaining was late. In addition, the [Seller] had already performed the Contract in accordance with the L/C and CIF term as set forth in the Contract, and thus did not breach the Contract in any manner.

The cost difference between air and sea transportation is part of the purchase price under the Contracts. It is a separate issue from the quality problem. It was clearly stated in the Contract that "the beneficiary is allowed to draw in the excess of L/C amount for air shipment of difference between sea and air." Therefore, the [Buyer]'s refusal to pay the aforesaid amount on the ground of quality problem is a breach of the Contract.

The [Buyer] redid the clothes in its factory. The receipt was also issued by its own company. According to Article 48 of the CISG, the [Buyer] may require the [Seller] to remedy products quality defects by repair. The request must, however, be made at the same time the [Buyer] discovered the non-conformity of the goods and gave notice to the [Seller] or within a reasonable time thereafter. Otherwise, the [Buyer] loses its right to request. [Translator's note: Although the transcript refers to Article 48 CISG, this is believed to be a typographical error, with Article 46 -- specifically Article 46(3) -- of the CISG the reference intended.]

During the performance of the contract, the [Buyer] never told the [Seller] that it was reselling the goods in Germany. The [Buyer]'s claim for loss of profit and loss of orders has no connection with this case.

The [Seller] concluded with the following additional comments on [Seller]'s claim:

1. [Buyer] should pay [Seller]'s traveling fee of RMB 5,653.50 and taxi fee of RMB 3,850, incurred for resolution of this case, which totals RMB 9,503.50.

2. [Buyer] should pay the arbitration fee, which has been paid by the [Seller] in advance.

3. [Buyer] should pay [Seller]'s attorneys' fee of RMB 30,000.

4. [Buyer] should pay the price for all contracts of US $53,871.20 and the difference between the air shipment and sea shipment of RMB 134,868 and interest on this amount calculated from May 1998 to May 1999, at the interest rate published by Bank of China Shijiazhuang Branch, (US $53,871.20 x 8.29 + 134,868) x 7.0125 = RMB 40,775.

5. [Buyer] should pay the price of US $8,778 for delivery No. FL26, sea transportation fee of RMB 12,578.90 for returning goods, and related fees of RMB 981.54, which, in aggregate, amount to RMB 86,330, as well as interest on such amount calculated from September 1998 to May 1999 at a rate of 0.70125% (86,330 x 0.70125% x 6/12 = RMB 303). The total is RMB 86,633.

After the hearing session, both parties presented explanations of their claims, and submitted supplementary materials.

III. OPINION OF THE ARBITRATION TRIBUNAL

(1) Applicable law

The parties are from Germany and China, both of which are Contracting States of the CISG. Therefore, the CISG should be applied here.

(2) Inspection and the quality of the goods

In their Sales Confirmation Nos. xxx006, xxx007, xxx011, and xxx012, the parties did not include an inspection clause, nor did they specify the inspection place, inspection agency, or inspection procedure. The Arbitration Tribunal therefore was of the opinion that according to the CISG, the [Buyer] has the right to inspect the goods after receiving them. After the [Buyer] raised objection to the quality of the goods and asked the [Seller] to come to Germany to inspect them, the [Seller] did not ask the [Buyer] to have the goods inspected by an independent inspection agency.

On 29 May 1998, after receiving the seventeen defective clothes returned by the [Buyer], the [Seller] sent a fax to the [Buyer], stating, "we've found the problems you complained". The inspection report submitted by Ms. W of ___ Import & Export Company on 16 June 1998 also evidenced that there were defects in material, color, and workmanship of the goods. Therefore, the Arbitration Tribunal holds that the existence of defects in the goods delivered by the [Seller] is a fact confirmed by both parties.

(3) The responsibility for refusing to take delivery FL26 of Contract No. xxx006

The Arbitration Tribunal holds that although the [Buyer] has given the reason for refusing to take the No. FL26 goods, according to the CISG, the reason the [Buyer] presented in support of argument that the [Seller] has committed anticipatory repudiation is unacceptable.

After the [Seller] delivered the goods according to the Contract, the [Buyer] should have performed its obligation to pay the price and to take delivery of the goods. If the [Buyer] has objection to the goods, it should raise the issue through legal procedure, but not refuse to take delivery. The [Buyer]'s refusal to take delivery of the goods has constituted a breach of the contract.

Considering that the [Seller] has already taken back these goods, the [Buyer] shall bear the cost of the transportation fee and the related interest, and need not pay the price for the goods.

(4) The difference between the air shipment and the sea shipment

The Arbitration Tribunal notes that before the delivery of the goods it was agreed by both parties that the [Buyer] shall bear the difference between the cost of air shipment and sea shipment with respect to Contract Nos. xxx006, xxx007, xxx011, and xxx012; therefore, the [Seller]'s claim for this should be accepted. However, the transportation fee for 1,236 pieces of clothes should be deducted.

(5) [Buyer]'s cost for remedying the defects of the goods

In the fax the [Buyer] sent to the [Seller] on 8 May 1998, the [Buyer] stated that in order to limit the loss resulting from the defective goods, it would do its best to resell the goods to its customers no matter for how much they could be sold. However, the [Buyer] did not tell the [Seller] that it was going to repair the goods.

On 20 May 1998, the [Seller] also stated in its fax to the [Buyer] that the [Buyer] should do what it could to mitigate the loss, but the [Seller] should be informed if the [Buyer] sent offers to its customers. Therefore, based on the faxes between the two parties, the Arbitration Tribunal holds that there is no dispute with respect to the fact that both parties agreed to mitigate the damages after quality problems were raised.

The [Buyer] repaired the goods without giving notice to the [Seller] in advance, and resold the goods for the same price as in the contract to its customers. The [Seller] raises the following issues in this respect: (1) the [Buyer] repaired the goods without notifying the [Seller], (2) the price for repair was too high, and (3) the evidence for the cost of repairing is unacceptable.

Considering the above, the Arbitration Tribunal recognizes that the [Buyer] repaired the goods at a cost that is within the average labor fee in Germany and resold the goods at the same price as provided in the Contract. The [Buyer] also submitted an audit report issued by an independent auditor; therefore, the [Buyer]'s claim for the cost of repairing the clothes should be accepted.

The Arbitration Tribunal also recognizes that when the [Buyer] was mitigating the damages, it should have given notice to the [Seller], especially about the cost of repair it was going to incur. The [Buyer] should have consulted with the [Seller]. Therefore, there was a problem in the [Buyer]'s performance of mitigating the loss, and the [Buyer] shall bear 30% of the cost of repairing.

Since the reason for repairing was the defects in the goods, the Arbitration Tribunal holds that the [Seller] shall bear 70% of the cost of repairing.

(6) The 1,236 pieces of clothes the [Buyer] has not sold

After being inspected by Ms. W of xxx Import & Export Company, who was appointed by both parties, it was found that there were defects in the goods. Therefore, the amount related to these goods, which the [Buyer] alleged in its counterclaim should be accepted.

The [Buyer] need not pay the price for the 1,236 pieces of clothes and their transportation fee.

The [Seller] shall pay the cost incurred inside Germany, which includes transportation fee, moving fee, and warehouse fee. In addition, the [Seller] shall pay the [Buyer] the loss of profit resulting from the defective goods, and the reasonable amount shall be 20% of the contract price.

(7) Price for the clothes the [Buyer] has sold

The Arbitration Tribunal holds that, except for the aforesaid 1,236 pieces of clothes and the No. FL26 goods, the [Buyer] shall pay the price for the goods which have been sold to its customers.

(8) [Buyer]'s claim for customers' loss, loss of discount fee, and loss of orders

About the [Buyer]'s counterclaim for customers' loss, loss of discount fee, and loss of orders, the Arbitration Tribunal holds that those losses were not foreseeable by the [Seller] when the contract was formed. In addition, the [Buyer] did not provide enough evidence for those losses. Therefore, they should not be accepted.

(9) Cost of attorneys' fee, traveling fee

The Arbitration Tribunal holds that each party shall bear the aforesaid fee on its own.

The other claims of both parties are dismissed.

IV. THE AWARD

(1) [Buyer] shall bear the cost of US $5,830.10 for shipping back the No. FL26 goods and related interest at a 6% annual interest rate, calculated from 8 May 1998 to the date this award takes effect.

(2) [Buyer] shall pay the cost difference between air shipment and sea shipment in the amount of of US $7,653.01 (total difference of US $11,422.72 minors the cost difference for 1,236 pieces of clothes in the amount of US $3,769.71) and corresponding interest at a 6% annual rate, calculated from 20 March 1998 to the date this award takes effect.

(3) Except for the 1, 236 pieces of clothes and the No. FL26 delivery, [Buyer] shall pay the contract price of US $36,092.70 and corresponding interest on this amount at a 6% annual rate, calculated from15 May 1998 to the date this award takes effect.

(4) [Seller] shall pay the [Buyer] the loss of profit resulting from 1, 236 pieces of defective clothes (17,778.50 x 20%) = US $3,555.70 and other transaction costs (loss of custom fee of US $2,842.41, transportation fee and moving fee inside Germany of US $657.45 and warehouse fee of US $1,371.96) and corresponding interest on the above amount. The interest shall be calculated from 19 June 1998 to the date this award takes effect.

(5) [Seller] shall pay 70% of the cost of repairing the clothes, which is US $37,641.78 x 70% = US $26,329 and corresponding interest on this amount. The interest shall be calculated from 15 May 1998 to the date this award takes effect.

(6) Each party shall bear the arbitration fee equally. Each party shall bear the arbitration counterclaim fee equally.

(7) All other claims and counterclaims are dismissed.

(8) The aforesaid fees shall be paid within 45 days after this award takes effect. Otherwise, an additional 8.5% annual interest shall be added as penalty for any amount over due.

This is the final award.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the People's Republic of China is referred to as [Seller] and Respondent of Germany is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB]; amounts in the former currency of Germany (Deutsche Mark) are indicated as [DM].

** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

*** JIANG Chi is an associate with the New York office of Debevoise & Plimpton LLP.

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